Sony to halve its 2,500 suppliers

Sony is set to terminate partnerships with more than half of its parts and materials suppliers by 2011 in a new extraordinary effort to save the company around 500 billion Yen (3.3 billion).

The decision will see the company’s fleet of 2,500 suppliers cut to around 1,200. Those remaining suppliers will see a significant increase in parts and materials purchased by Sony as the struggling company tries to balance cost-cutting with steady production volumes.

It is certain that Sony’s game subsidiary SCEI – which had previously been given considerable freedom in procuring parts – will be affected by the new measures.

The news marks another divisive, dramatic and perceivably desperate move from the global electronics enterprise, which recently announced it will cut 16,000 jobs and shut about 14 percent of its 57 manufacturing facilities.

Sony has forecast an operating loss of 110 billion for the current fiscal year, while the company reported a record 227.8 billion Yen loss for the 2008-9 financial year. The company’s procurement costs currently total around 2.5 trillion Yen.

Sony has gone great lengths to modernise itself away from long-established Japanese business model where materials supply has traditionally been spread across a chain of native companies. This system has been adopted for many years as part of a wider aim to support small and medium-sized businesses across Japan, though has never been seen as an efficient or economical practice.

Now with a global recession pervading through Japan’s entire network of business sectors, companies are being urged to throw off weight in order to stay afloat.

It is thought that Sony’s action will be replicated by a number of other Japanese businesses.

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